Firms in poor countries often tend to rely on alternative sources of financing different than banks. We show that borrowing constraints lead to financial arrangements between firms that can amplify the effect of liquidity or productivity shocks in the economy. In particular, we focus on the...

Many macroeconomic models involve hybrid equations, in which some variables are a function of both their lags and their expected future value. The hybrid ``New Keynesian'' Phillips Curve is a prominent example. Estimates of such hybrid models have produced conflicting empirical results: Studies...

This paper considers measures of uncertainty used in economic estimation. Our first contribution is to address the theoretical relationship between cross-section and time series measures, highlighting the reasons why these might diverge. In a subsequent empirical section, we compare measures of...

This paper investigates (i) what has determined the land investment behavior of Japanese firms since the latter half of the 1980s; and (ii) how the current market prices of their land assets diverge from their shadow prices (marginal values of land investment). To do so, we estimate nonlinear...

This paper proposes a stochastic model of investment with embodied technological progress, in which firms invest not only to expand the capacity as in Pindyck (1988) but also to replace old machines. The scrapping decision or the age of the oldest machine is then endogenous and evolves...

We show that very little is needed to create liquidity under-supply in equilibrium: only the presence of credit constraints on demand. We show that the under-supply is a non-monotone function of the demand distortion that causes it, a result that may have interesting implications for emerging...

The events of the 1990s, which led to the collapse of the banking sector in many countries around the world, have renewed the need to devise some preventive policies. However, the success of these preventive measures is contingent on the predictability of the crisis both in nature and extent....

The large wealth and consumption inequality in the U.S. is usually attributed to two market frictions: debt constraints and incomplete markets. Recent literature has argued that debt constraints are the critical friction while market incompleteness plays only a secondary role. We evaluate the...

A simple two-country model of international trade under uncertainty is considered, where investors choose uncertain projects depending on interest rates, with high rates leading to risky projects. If investment is financed by bond markets, there can be asymmetric equilibria which can be Pareto...

We investigate the extent to which firm-level data are consistent with the microeconomic foundations of the benchmark financial accelerator model of Bernanke, Gertler, and Gilchrist (1999). To that purpose, we construct a new dataset that directly links firm-specific balance sheet variables to...